When Mr Rajat Gupta was elected Managing Director of McKinsey, it was headline material in Indian business media. A few years later came the news about Rajat Gupta’s being charged with insider trading and his going to jail. So, when I saw his book, Mind Without Fear, in the campus bookstore I wasted no time in getting a copy.
The book broadly deals with three aspects of Gupta’s life. His personal life, of which he offers relatively scanty details, his life at McKinsey of which he speaks at some length and the case that finally resulted in an unfortunate denouement for him and, quite surely, for members of his immediate family.
Rajat Gupta’s professional life
Gupta’s professional life is the stuff that dreams are made of. He himself describes it as a “charmed” life. Names such as Hank Paulson, A G Lafley, Larry Summers, Bill Clinton, George Bush, Kofi Annan, Manmohan Singh, Klaus Schwab and the Wallenberg family float in and out of the book in an easy fashion. From back home in India a host of rich and powerful names pop up, albeit not all of them command a great deal of respect in the world of business or in the securities markets in India.
Gupta weaves well all these names into the context of his story that they do not come across as an obtrusive or irritating names-dropping effort. Gupta does not have to drop names. He is a man of spectacular achievements in his own right.
Professional and institutional achievements
At the end of reading about his professional achievements one develops a great deal of envy and admiration: For his revival of the ICC in Paris, his tenacity in setting up the Indian School of Business, his entrepreneurial energy in setting up the Global Fund for the eradication of malaria, aids and TB, his abilities as a deal maker that held together that organisation made of many disparate constituencies, his willingness to pick up the gauntlet that was thrown at him by Barry Bloom, the Dean of the Harvard T H Chan School of Public Health, that resulted in the setting up the Public Health Foundation of India and so on.
In all of these endeavours Gupta seems to have played more than the role of a guiding force Chairman. He seems to have rolled up his sleeves and helped them find key leaders, give a sense of purpose and direction to the institution, helped evolve ethos, structures and processes and resolve touchy internal conflicts.
Without a doubt, McKinsey offered Mr. Gupta the platform that helped him unleash his creative energies in building all these institutions. At first brush one would be tempted to surmise that his success at the Firm was a case of the right man being at the right place. When you look at the way he accepted challenges such as that in building the offices in Scandinavia, his role in changing the culture in the office in Chicago as a prelude to building the business presence in that region, his contribution as Managing Director in moving the firm to emerging markets, having spotted that the future lay in those geographies, navigating the firm through the turbulent days of the technology boom and the subsequent meltdown and the changes that he brought about in its governance, one cannot but conclude that there was more than just chance or timing underlying his success.
Many in the world of business would trade an arm, a leg and a lot more to achieve what Gupta did.
Failed Judgment?
Yet, the third part of the book where he deals with the case and its unfortunate culmination raises a number of questions.
First, is the matter of poor judgment that he seems to have displayed in having chosen to do business with Rajaratnam. What persuaded him to do so? It surely could not have been to experience the adrenalin rush of making or losing money in the securities trade; for Gupta’s position in the venture was that of a passive partner. Was it the lure of making wealth far beyond what he may have earned at McKinsey, which itself may have been significant and which Gupta is rightly silent about? Gupta was estimated to be worth a billion dollars or more according to a mention in the book, even without the partnership with Rajaratnam.
The question of whether Gupta was lured by wealth assumes even greater relevance as one reads about his eagerness to join the private equity fund house, KKR, as an advisor, even as he was on the Board of Goldman. The conflict of interest that Lloyd Blankfein, CEO of Goldman, kept alluding to till he forced the former to choose between KKR and Goldman must have been only too evident to Gupta, a man who had presided over governance reforms in his firm and who had chaired many other high profile boards? What drew Gupta so strongly to KKR?
The Case
And now for the final bit about the case.
Gupta’s account of the case turns on three key elements as presented by him in the book. First, he was not guilty as charged because he did not pass on market moving information. Further, there was no evidence that anyone had traded based on information that he had passed on, and even less evidence to prove illicit gains based on such trade. The calls that the prosecution said he had made to Rajaratnam had been made in relation to a floundering investment that he had made in the Voyager Fund, a fund managed by Raj.
Second, the prosecution managed to prevail due to two reasons. One, they had built a case based on evidence that was at best circumstantial in nature. And the prosecution built up that case with a great deal of determination.
Third, some of the devices that the prosecution used to their advantage in the case, such as the carefully timed and choreographed media releases, were not beyond ethical if not jurisprudential reproach.
Gupta’s account of the sentencing, his life in jail and most importantly the grief that his family went through are tragic to say the least. The damage that this case caused to Gupta and his family must be incalculable. Apart from having to step down nearly all of the positions of profit that he held, he lost many among his circle whom he had looked upon as friends. One of his daughters faced humiliation as a student in Harvard. The $ 20 million penalty that he was ordered to pay was relatively less painful, compared to the loss of reputation and stature that he must have suffered.
In his own mind of course the unkindest cut of them all appears to have been from Mc Kinsey itself. Gupta was stripped of his office and secretary. He claims to have gathered informally that they asked their employees not to provide testimonials to the court in preparation for the award of the sentence. His name was struck off the list of alumni.
Wages of Tragedy
It is well over a year since I read the book. The story of Gupta’s comes back to me when I talk about what matters in in one’s professional life to students in my class. I cannot stop being spell bound by the stupendous achievements of an ordinary middle class lad from India, all in a span of less than forty years. To succeed in a firm that is filled with smart people with massive egos and that professes and follows the harsh policy of up or out is no mean achievement. To emerge as its youngest MD at the age of forty-five, is even more remarkable.
Given all of that, the turn of events around the case is tragedy of a massive proportion. The hand that the “anarchy of destiny”, to borrow Gupta’s phrase, dealt him is immeasurably sad. I cannot stop imagining how he must feel as he penned those final lines in the epilogue, …(“T)he question on my mind is how do I complete my life with tranquility and grace.” Gupta’s current state of the mind is perhaps summed up in these lines of Rabindranath Tagore whom he quotes extensively in his book.
Thou hast led me through my crowded travels of the day
To my evening’s loneliness
I wait for its meaning through the stillness of the night
Was Gupta guilty or innocent? I am not sure yet. His version of the story is compelling. No matter whether he was guilty or not Gupta led a life that would be a source of inspiration for many young Indian men and women. And no matter what the truth is my heart goes out to the man for what he has suffered.
Dr. G. Sabarinathan is Associate Professor, IIMB.